Markets continue to decline

Shares extended the losing streak begun last week, closing down significantly yesterday on both of the nation's stock exchanges.

On the HCM City Stock Exchange, the VN-Index plummeted by nearly 2.2 per cent from last Friday's close to conclude yesterday's session at 469.69 points. Electronic trading boards filled with the red of nearly 200 codes plunging to their floor prices.

The value of trades jumped by 17.6 per cent over last Friday's total, however, reaching VND2 trillion (US$95.2 million) on a volume of 110.4 million shares.

The VN30 Index, which tracks the city's 30 leading shares in terms of capitalisation and liquidity, also lost 2 per cent, closing at 536.35 points, with 17 of the top 30 stocks bottoming out and only Vietinbank (CTG) and Vietcombank (VCB) posting gains on the day.

Profit-taking ate into real estate shares despite a Government move to help shore up the real estate market by giving project developers a 12-month extension on payment of their land use fees as well as cutting land use fees due this year by 50 per cent. The total value of the relief was estimated at VND64 trillion ($3 billion).

However, the National Assembly Economic Committee yesterday morning forecast that economic growth in the second quarter would reach only 4.5 per cent, and a Government report on the nation's economic outlook suggested that, if no measures were successful in promoting production, targets of higher growth and ensuring social security would become more problematic.

"There must be a really strong growth pressure in the last six months of the year if growth is to approach 6 per cent," the report said.

On the Ha Noi Stock Exchange yesterday, the HNX-Index also retreated by over 3.3 per cent to 78.84 points. Value topped VND979 billion ($46.6 million), a slight decline from last Friday's close, while volume reached nearly 91.5 million shares.

Habubank (HBB) continued to be the most-active share nationwide with 8.1 million exchanged.

Foreign investors concluded yesterday as net sellers on both bourses by a margin of VND63 billion ($3 million).

"After today's fall, the short-term trend has shifted to declining, and investors had better turn their portfolios into cash to ensure short-term safety," Hoa Binh Securities Co analyst Vu Thai Ha wrote in a note.

VN, Russia eye $10b trade
 
Viet Nam and Russia targeted to reach a trade turnover of US$10 billion in 2020, according to a conference held in the capital late last week.

Trade relations between the two sides have shown many positive signals since the beginning of this year, affirmed Deputy Minister of Industry and Trade Hoang Quoc Vuong.

He said that in the first quarter, the countries gained nearly $520 million in trade, a year-on-year increase of more than 20 per cent.

Of the figure, he added, export from Viet Nam to Russia reached more than $311 million, up 31 per cent in comparison with the same time last year.

During this time, the country spent $208 million on imports from Russia, a year-on-year up of 7.7 per cent.

With such positive results, the two sides aim to reach a trade turnover of $3 billion this year, he said.

At the conference, participants agreed that relations between Viet Nam and Russia would further develop especially in trade, investment and tourism as the latter became a member of the World Trade Organisation (WTO).

Accordingly, Russia will reduce import tax on many agriculture, aquaculture, garment, textile and footwear products.

As a result, taxes based on some Vietnamese products will be about 30-50 per cent less than the current rates.

Moreover, the country is presently negotiating a free trade agreement with Russia, Belarus and Kazakhstan.

Despite the potential to develop trade relations, experts agreed that there remained many shortcomings, including an information shortage.

Few Vietnamese companies have branches and representative offices in Russia, said Vice Chairman of the Viet Nam Chamber of Commerce and Industry Pham Gia Tuc.

To solve the problem, Tuc advised the development of a distribution system by which Vietnamese companies could represent themselves in Russia.

Russian delegates at the conference promised to give Vietnamese companies a chance to expand their operations in Russia.

The Ministry of Planning and Investment said it would organise many promotion programmes to assist companies from both countries.

However, Vietnamese companies were urged to actively participate in gathering information on Russian companies.

Russia is an important partner to Viet Nam with a population of 140 million people. Last year, trade turnover between the two sides hit $2.1 billion.

Mobile phone, accessory exports hit new highs

Exports of mobile phones and spare-parts topped US$3 billion in the first four months, a 161.5 per cent increase year-on-year to place the industry second after garments and textiles in Viet Nam's top 10 in export value.

Customs statistics show that mobile phone and spare-parts exports had previously reached US$300-400 million a month but since July last year they have risen strongly to $1.3 billion a month and have held second spot in export value since last September.

Exports of computers, electronics items and spare parts stood at $1.8 billion from January 1 to April 15, an increase of 79.2 per cent over the same period last year.

This record was attributed to the exports of Korean giant Samsung's Viet Nam division which last year accounted for more than 70 per cent of mobile phone exports, worth $6 billion, and this year reached about $1 billion a month. With such export growth, Samsung Viet Nam's export value could reach between $11-12 billion this year, said deputy minister of Industry and Trade Nguyen Thanh Bien.

Viet Nam Electronics and Informatics Corporation chairman Le Ngoc Son told Saigon Times online that domestic exports of the electronics sector were increasing rapidly. Samsung had taken the advantage with its mobile phones while Intel, Canon, Compal and Foxconn had also made a considerable contribution to the country's exports.

Meanwhile, exports from domestic businesses remained modest. They were mainly hired to assemble for foreign partners from Japan, Korea, Singapore, Malaysia, Taiwan and other Asean countries.

Son said the number of Vietnamese electronics businesses was large but they had failed to compete with foreign partners due to limited finance and technology. Foreign companies held 80 per cent of the local electronics market share and made up 95 per cent of the export value.

Most Vietnamese enterprises were involved in buying parts and assembling products, such as televisions, karaoke equipment and refrigerators, for local consumption. In the domestic market however, locally made products were mainly consumed in remote areas because they failed to compete with products of foreign firms in cities.

In addition, local firms in the electronics industry were shifting to develop LED, solar or wind power products while seeking new business opportunities.

The Government has planned to manufacture heathcare equipment and specialised electronic products that will generate opportunities for a number of companies in this area.

Viet Nam now has nearly 500 (local and foreign) enterprises operating in the electronics industry.

Last month, Nokia began construction of a plant in Bac Ninh Province to cost 200 million euros (US$264 million).

Garment, textile sector urged to restructure

Viet Nam's garment and textile sector faces problems with its structure and production methods, said Nguyen Van Tuan, deputy general secretary of Viet Nam Garment and Textile Association.

Tuan said the country needed 400,000 tonnes of cotton per year, but domestic production could meet a tiny 0.75 per cent of the demand. The industry also supplied only 30 per cent of a yearly demand of 400,000 tonnes of man-made fibre.

He said the sector continues to import 100 per cent of its spare parts and 70 per cent of the materials, which, combined with a low production capacity, makes Viet Nam less competitive than other countries.

He added that one of the biggest challenges was that the sector last year imported 5.2 billion metres of fabric out of a total 6 billion metres needed.

Than Duc Viet, managing director of Garment 10 Company, agreed that garment and textile production had been determined by market.

In most of big markets including the US, Eastern Europe and Japan, retailers accounted for 70 to 90 per cent of the market share while 10 to 30 per cent belonged to commercial businesses and producers under the original brand manufacturer (OBM).

"This means that Vietnamese garment and textile producers do not have direct access to markets but have to operate through middlemen," Viet said.

Last year, the world's garment and textile turnover was US$480 billion. Viet Nam accounted for 3 per cent of that figure with a turnover of $14.5 billion, though it has been listed among the five leading exporters.

In addition, the sector has been lacking capital and mainly dependent on bank loans. Several businesses have not expanded their production or upgraded technologies because of high interest rates.

Pham Van Chat, a representative from the Ministry of Industry and Trade, said garment and textile enterprises have been experiencing a serious capital shortage even though the Government and commercial banks have provided solutions to help them access loans.

Dang Phuong Dung, the association's vice chairwoman cum general secretary, said the sector should focus on building and expanding its distribution system, building Vietnamese trademarks and increasing co-operation.

Dung asked garment and textile businesses to develop their brand names in neighbouring markets such as Laos, Cambodia and Myanmar.

The association said the industry should develop, reduce imports and increase value for businesses.

Investment opportunities for Indian businesses in VN

Vietnamese trade counsellor Nguyen Son Ha introduced the country's latest investment attraction policy and presented fields open to investment at a seminar in India on May 11.

At the seminar on bilateral trade and investment opportunities, counsellor Ha, who is also head of the Vietnamese trade office in India, spoke of the advantages offered by the ASEAN-India Free Trade Agreement (FTA) and ways of boosting two-way trade.

The counsellor also called on Indian businesses to actively participate in exhibitions and fairs in Viet Nam.

Indian businesses inquired into procedures to set up businesses, representative offices and land lease in Viet Nam, as well as policies on corporate income tax and investment preferential treatment.

Can Tho lures more than $76m in investment capital

The industrial zones in the southern Can Tho City have so far this year attracted 10 projects of foreign and domestic enterprises with a total investment capital of US$76 million, bringing the number of projects up to 198 with a combined registered capital of $1.6 billion.

The new projects cover sectors as diverse as seafood, footwear, fertiliser, chemicals, steel and auto assembling.

Companies operating in the IZs generated a total revenue of about $380 million in the first four months of this year, up 72 per cent from the same period last year. The firms earned $133.4 million of that amount from exports, for a year-on-year increase of 63 per cent.

Mills produce 1m tonnes of sugar in first four months

Sugar mills nationwide churned out 1.12 million tonnes of sugar in the first four months of this year, up 78,700 tonnes against the same period last year, according to the Ministry of Agriculture and Rural Development.

Sugar producers are expected to add another 195,000 tonnes from the 2011-12 crop, and sugar storage as of mid-April was 355,000 tonnes. Sugar import volume is estimated at 70,000 tonnes.

The ministry reports that with such resources and inventory, the supply is enough to meet demand at the local market.

Sugar prices hover around VND900,000-1.1 million (US$42.86-52.38) per tonne.

Da Nang to call for tourism investment

Da Nang has been soliciting the investments of Italian businessmen, chairman of the city's People's Committee Van Huu Chien said in a meeting yesterday with Italian ambassador to Viet Nam Lorenzo Angeloni.

"We expect to see more Italian enterprises invest in the city in coming years. Our six industrial zones and a hi-tech park have already welcomed 210 projects worth US$3 billion," Chien said.

But the city has seen only three investment projects from Italy with a total capital of $1 million, so he urged Italian businesses to consider business opportunities in the hi-tech park and tourism sector.-

Eximbank takes control of Sacombank board

Eximbank (EIB) has invested about VND1.6 trillion (US$76.2 million) in Sacombank (STB) and will control Sacombank's board of directors, Eximbank chairman Le Hung Dung said on Sunday at the EIB shareholders meeting.

EIB currently holds 9.73 per cent of equity in STB, and Dung said EIB had received authorisation from other shareholders representing a total of 53 per cent of STB's charter capital.

At Sunday's meeting, EIB shareholders also approved the dismissal of Pham Huu Phu from his post as a member of Eximbank's board for the 2010-15 term and nominated him for election to the STB board at the latter bank's shareholders meeting on May 26.

EIB also passed its business plan for this year, under which its charter capital would be increased 9.7 per cent to VND13.6 trillion ($645 million). At the end of the year, total assets would total VND210 trillion ($10 billion), an increase of 4 per cent over the previous year, while deposits would be up 37 per cent to VND100 trillion ($4.76 billion). The bank expected credit growth of 17 per cent to a total of nearly VND87.36 trillion ($4.16 billion), while pre-tax profits would rise 13 per cent to VND4.6 trillion ($219 million).

In response to shareholder concerns that the pre-tax profit target was too low, Dung said the figures were based on market conditions which remained very difficult at this time.

The central bank has put a cap on lending interest rates, and the lending rate was gradually declining, causing bank profit to shrink, added EIB general director Truong Van Phuoc.

This year, EIB also plans to pay a 21.2-per-cent dividend, of which 11.2 per cent would be paid in cash. Last year, Eximbank paid a 14-per-cent cash dividend and expects to pay an additional 5.3 per cent on last year's undistributed profits.

Retailers battle falling demand
 
"Sharing with consumers" is one of the most common strategies that retail enterprises are adopting as they try to survive at a time most consumers are tightening their belts, a conference in HCM City has heard.

Experts said at the conference last week that 2012 was set to be a specially difficult year for retailers since the market's purchasing power was dropping strongly.

In 2011, the country's total retail turnover of goods and consumer services increased by only 4 per cent, much lower than the average 11 per cent recorded in the 10 previous years.

In the first four months of this year, the situation looked worse, they said.

According to the Ministry of Planning and Investment, in the period the country had 17,735 enterprises dissolve or stop operations. Of these, 5,379 were involved in wholesale and retail trading.

Pham Thanh Cong, senior expert with market research firm Nielsen Viet Nam, said the prolonged economy slump was forcing consumers to save more.

In 2011, Viet Nam's savings ratio climbed to 70 per cent, much higher than Asian people's average level of 59 per cent.

Sixty-three per cent of shoppers were very price conscious and seeking ways to save most while shopping, Cong said.

The situation in the domestic retail market was not much better in the first quarter of this year, he said, adding that turnover had dropped by between 10 and 40 per cent at several supermarkets.

To increase their sales turnover, retail enterprises found it necessary to "share with consumers" by cutting prices and offering sales promotions.

Sales promotions with attractive prices could help retailers prompt consumers to loosen their purse strings a bit, Cong said.

The deputy general director of a major supermarket chain in HCM City, who declined to be named, said that his company had to reduce profits and cut costs in order to have the money to launch several sales promotion programmes to attract customers.

In the first quarter of this year, his supermarket network's spending on sales promotion increased by 30 per cent compared with the same period last year, he said.

Danh Quy, head of Sai Gon Coop's investment and planning office, also said that consumers were paying a lot more attention to prices so supermarkets would not be able to sell goods if they did not have sales promotion programmes.

"In addition to trying to offer attractive prices, we have also carried out several other measures to sharpen our competitive edge, with focus given to core business goals, safe investments, effective financial management, and improvement of management technology," Quy said.

Sai Gon Co-op was also improving co-operative ties with companies and localities nationwide to ensure sourcing of high quality goods at competitive prices, he said.

Many speakers at the conference said retailers should be more realistic and active and seek ways to cut costs, reorganise their administration and divide risks.

They also advised retailers to clearly define their proper market segments while seeking new markets, improving the capacity of their distribution network and building brand names.

Dinh Thi My Loan, general secretary of the Viet Nam Retailers Association, proposed that the Government quickly reduce corporate income tax to 20 per cent and closely control prices of electricity, water, coal and fuel. This was needed to help enterprises minimise their input costs, she said.

She also said that a support fund for small and medium enterprises should be set up to enable access to capital they needed for maintenance and development.

Vinacomin strives for reliability
 
The Viet Nam National Coal and Mineral Industries Group (Vinacomin) has targeted an annual growth rate of 6-7 per cent and to ensure national power security.

The target of the country's largest coal supplier is included in its development plan for 2011-15, approved by Prime Minister Nguyen Tan Dung.

Dung asked the group to take full advantage of its resources to improve its competitive capacity to develop coal, minerals, electricity, mechanics, chemical and construction materials.

Vinacomin is scheduled to explore part of the coal basin of the Hong (Red) River Delta and will carry out experimental exploitation in mines where geology is favourable.

The group has set a target to renovate technology to increase its exploitation capacity of 61 mines in the North Western coal basin. It will invest to build 28 mines, each with a capacity of up to 2 million tonnes per year. Sixteen mines will be in Uong Bi, ten in Cam Pha and two in Hon Gai townships.

Vinacomin also plans to expand open-cast mines by applying advanced technology to increase their yields. For the Khanh Hoa open-cast mine in northern Thai Nguyen Province, the group will build a pit to exploit the coal underneath.

The five-year plan also shows that the group is prepared to operate the existing coal thermal power plants safely and effectively and put into operation six other power plants, including Mao Khe with a capacity of 440MW, Cam Pha II 330MW and Cam Pha III 270MW.

Vinacomin also will continue its investment to build two thermal power plants in central Nghe An province and northern Hai Phong City so they can operate on schedule.

The group will continue to research and invest in coal thermal power plants with the PM's approval. It will also buy or invest in coal mines in foreign countries to ensure stable material sources.

Golf course projects continue to tee up

Though the Ministry of Planning and Investment has yet to receive the Government's green light for its proposal to enlarge the master plan for development of golf courses from 87 to 115 by 2020, the door has not been shut on new golf courses, according to the deputy head of a ministry think tank.

Hoang Ngoc Phong of the Institute for Development Strategies said: "New projects must comply with land-use rules, not encroach on rice fields or protective forests, not be diverted for urban development, and must come up in regions which tourism potential."

Getting a licence to build a new golf course now depends on provincial authorities' preparations for the project and fulfilling some basic criteria set by the Government.

In the past few years, provinces and cities have kept up efforts to add new projects to the master plan. At a seminar in Ha Noi last Friday, Phong said they were seeking to add 30 to 40 new courses.

The Thai Nguyen Province People's Committee recently proposed licensing four new courses instead of the two (in Yen Binh and Long Son) planned last year.

Quang Ninh has unveiled plans for a course in Mong Cai while Khanh Hoa, Long An and some other provinces have all sought to increase the number.

Not surprisingly, people wonder if Viet Nam would be among the countries with the largest number of golf courses if all these projects are added to the master plan, though Phong has denied it. He said the number of courses in Viet Nam would not match the 256 in Thailand, 230 in Malaysia and 152 in Indonesia.

Jeff Puchalski, CEO of golf course management and consulting firm Fore Golf Asia, was quoted by Viet Nam Investment Review as saying that if there were fewer golfers than expected, investors would stop developing courses in the country.

The plans to develop golf courses had attracted growing criticism from all segments of society for encroaching on rice fields and creating social and environmental problems.

On an online Government forum on Mach 22, Minister of Agriculture and Rural Development Cao Duc Phat admitted that agricultural lands had been lost to golf courses and industrial parks.

According to official figures, 29 golf courses are operational, 22 are under construction and 13 others have received licences.

Another 23 have been approved in principle. They are in 34 provinces and cities, and more than half belong to foreign investors.

The MPI said golf was contributing to the country's economy. In 2010, developers of the country's 29 courses paid an estimated VND25.4 billion (US$1.2 million) in tax and created 9,744 jobs.

Highway needs widening

The Ha Tinh – Can Tho Section of National Highway No 1A is sought to be widened and upgraded at a massive cost of VND91 trillion (US$4.4 billion), but finding the money for the project could prove very difficult.

Private investors are expected to bring in only around 50 per cent of the cost for the build-operate-transfer (BOT) components.

Thus, only if the Government provided more than 49 per cent of the money could the project go ahead, Minister of Transport Dinh La Thang told Viet Nam Investment Review.

But the Government wants the ministry to raise this portion from other sources.

To do this, the ministry wants to continue to collect toll on some sections of the highway where collection ends in the next few years, and use the proceeds of a proposed tax on individual vehicles to reduce the number of such vehicles.

But even if the plan for toll extension is approved by the National Assembly, there will be a shortfall of VND45-60 trillion ($2.14-2.86 billion) for the project.

The fee is expected to fetch revenues of only around VND10 trillion ($476.2 million) a year.

Besides, it is far from clear yet if the fee will be imposed at all. Nguyen Ngoc Long, deputy chairman of the Viet Nam Road and Bridge Engineering Association, said: "The proposal to collect fees on individual vehicles has faced criticism from the public."

The Ministry of Transport plans to turn the 1,050km section from two-lane to four.

Firms sit atop inventories

Co-ordinated efforts are needed to reduce the large stocks of unsold inventory in the manufacturing and property sectors.

As of April, the stockpile index grew by more than 32 per cent compared with the same period last year.

Sectors with high rates included metals, with nearly 102 per cent; vegetable processing, 95 per cent; fertilisers and nitrogenous products, 63 per cent; cement, 44 per cent; motorbikes, 39 per cent; and seafood processing, 35 per cent.

Deputy Minister of Industry and Trade Nguyen Nam Hai said the volume of unsold goods came down in April, but industrial production and business activities were stagnant.

Nguyen Huu Toan, deputy general director of the Sai Gon Garment Co No 2, said demand for garments remained very low, pointing out that his company's sales had dropped 30-40 per cent from the same period last year.

Cao Tien Vi, chairman of the Sai Gon Paper Company, said the economic crisis had forced customers to tighten their belts.

To liquidate stockpiles, simultaneous measures like price and tax cuts were required to attract customers, the HCM City Businesspeople Association said.

Many companies have chosen to slash prices by up to 70 per cent to ensure cash flow and save on rentals.

Huynh Van Minh, chairman of the association, said the Government should step in to help businesses with favourable policies.

The most vital measure required at the moment was waiver or/and reduction of value-added tax, which was currently at 10 per cent, he said. "VAT exemption/reduction can help firms lower expenses and thus make their products more competitive."

Vi said VAT breaks would certainly help boost demand.

But they needed to be for a long term and not just a few months to be efficient, he warned.

Distributors, market vendors promote local goods

Eight domestic companies introduced their products to shopkeepers and buyers in Thu Duc Market in HCM City last Saturday under a programme called "Ngay vang hang Viet" (Golden Day for Vietnamese Goods).

The event, which lasted two days, was part of a larger programme to link up producers and traders in traditional markets.

Organised by the Business Association of High-Quality Vietnamese Goods with support from the Thu Duc People's Committee, the event featured several activities such as introducing new products, games, product trials, meeting Vietnamese goods' ambassadors and promotions.

Eight companies took part, namely Vinamilk, Trung Nguyen Coffee Corporation, Bidrico Company, Duy Tan Plastic Company, My Hao Cosmetics Company, Lien Thanh Joint Stock Fish Sauce Product Company, Tai Ky Food Powder Company and Sun House Group JSC.

Ta Thi Kim Anh, head of the Thu Duc Market management, said the event was a bridge between producers and stall owners and enabled the latter to feel more secure because of the products' clear origins.

Similar events would next be held at Cau Xang Market in Binh Chanh District, Tam Binh Market in Thu Duc District and Thi Nghe and Ba Chieu markets in Binh Thanh District, the association said.

A survey it did found that around 72 per cent of consumers remained devoted to traditional markets, with only 28 per cent using modern distribution channels like supermarkets and convenience stores.

Vu Kim Hanh, its chairwoman, said the association would continue to organise such programmes to improve the competitiveness of Vietnamese products and enable the creation of a network of traditional markets in towns and cities.

Japan leads foreign investment in Binh Duong

The southern province of Binh Duong has bucked the economic downturn as well as shrinking foreign direct investment (FDI) inflows into the country by already reaching its annual FDI target for 2012.

In only the first four months of the year, the province surpassed its target of US$1 billion, attracting FDI projects worth US$1.462 billion, mainly from Japanese investors.

The province's achievement compares to the total of $4.267 billion that the country as a whole has attracted in the first four months.

Binh Duong is followed by HCM City and Hai Phong as leading FDI achievers in the country so far this year.

The property sector has attracted most of the FDI inflow into the province. Early this year, among the largest Japanese-invested projects registered in the province were the Tokyu Binh Duong Urban Area Project worth $1.2 billion, a tyre manufacturing plant worth $575 million, a $300 million yarn production plant and a $180 million shipbuilding factory financed by Oshima Shipbuilding Viet Nam.

The province's leaders yesterday granted an investment licence to another Japanese investor, Dai Nippon Printing, which will develop a $35-million factory producing laminate film and printing and packaging materials on a 3ha plot in My Phuoc 3 Industrial Park.

The factory is scheduled to begin operations by April 2013, providing packaging materials for domestic use and export to Asian and African countries. The factory plans to get an annual turnover of 5 billion Yen ($62.6 million) five years after inauguration.

Futoshi Hario, general manager of Dai Nippon Printing Company, said the company had decided to build its second overseas factory in Viet Nam because of increasing demand for the products in the country.

Recently, they have been importing their products to Viet Nam from their factory in Jakarta, Indonesia. The company chose My Phuoc 3 Industrial Park to invest in because it had well-developed infrastructure, Futoshi said.

According to the Ministry of Planning and Investment, Japan has emerged as the largest FDI provider for Viet Nam this year, with investments of $2.36 billion in the first four months, accounting for 70 per cent of the total FDI inflow.

Le Thanh Cung, chairman of the Binh Duong People's Committee, said that the province had received 167 projects from Japanese investors with the total investment capital of $3.114 billion. The number of Japanese investors was the biggest compared with other countries and territories in the province.

"I believe that there will be more and more Japanese investors choosing to operate their business here. The province promises to continue investing in developing infrastructure to create the most favourable conditions for foreign investors," Cung said.

He said Binh Duong remained the leader in attracting FDI because it had been effective in carrying out administrative reforms, improving quality of human resources and developing its infrastructure.

Tobacco smuggling leaves tax take short

The massive volumes of cigarettes smuggled into the country are proving to be a big drain on the Government's revenues.

It was around 870 million packs in 2010, or 22.9 per cent of all cigarette consumption in the country, but fell to 750 million packs and 18.2 per cent last year.

Last year, it translated into lost taxes of VND3.4 – 3.6 trillion (US$163.4-173 million).

The favourite contraband brands used to be JET and HERO though ESSE Lights from South Korea has also become popular since the end of 2010. It is smuggled in through the northern border provinces of Quang Ninh and Lang Son.

Most of the smuggling otherwise occurs through southwestern border provinces.

Authorities estimate that the domestic tobacco industry loses sales of 18,000 tonnes of raw materials due to the smuggling and more than 50,000 jobs.

It also means an annual drain of $400 million in foreign currency and a major hurdle to the development of the domestic industry.

Pham Kien Nghiep, general secretary of the Viet Nam Tobacco Association, said the smuggling was focused on the southwestern region because of the long borders with Cambodia and Laos and the ease of transport from those countries.

Many local people were tempted into the illegal trade due to poverty, he said.

With Cambodia and Laos imposing low taxes on tobacco, prices there were low, and smuggling into Viet Nam was lucrative, he said.

Thus, a pack of JET fetches a profit of VND6,000-7,000 once it is smuggled into the country.

Market management forces stretched too thin to be able to cope with the smuggling besides which there is little co-ordination between various agencies.

As for the smugglers, they are using increasingly sophisticated methods, making it hard to detect them.

Indices gain despite heavy profit-taking

Shares gained value on both of the nation's stock exchanges over the course of last week despite three falling sessions resulted from rising profit-taking pressure.

On the HCM City Stock Exchange, the VN-Index increased 0.79 per cent over the previous week, ending Friday's session at 480.10 points, while the VN30-Index, which tracks performance of the top 30 shares by market capitalisation and liquidity, rose 1 per cent to stand at 547.94.

Heavy profit-taking towards the end of the week helped improve market volume by 8 per cent over the previous week to an average of over 119 million shares and VND1.97 trillion (US$93.8 million) per session.

Market demand was mainly concentrated around low-priced shares and was not enough to maintain the balance of supply and demand as in the precious sessions, FPT Securities Co analysts wrote in a research note.

"On the other hand, the stock market has experienced a strong bullish phase since March, so downward adjustments are necessary to continue attracting investors and new cash flows to the market," they said.

Among hot sectors last week, banking shares rose 5.12 per cent; shares in the securities sector 3.26 per cent; mining shares 3.26 per cent; and real estate shares 1.48 per cent.

Ninh Van Bay Travel Real Estate Co (NVT) was the biggest gainer with an increase of 25 per cent over the course of last week. The impressive rise could be attributed to its quarterly profit of over VND2 billion ($96,000) during January-March, a recovery from consecutive losses in the past six quarters. However, the company has targeted a net profit this year of just VND3.2 billion ($153,000).

According to analysts with the financial website vietstock.vn, the stock market is currently supported by positive data, including the central bank capping lending interest rates at 15 per cent per year for selected sectors and the Government considering a business stimulus package worth VND29 trillion ($1.38 billion) in the forms of tax reductions.

"Basically, economic policy has entered a cycle of expansion to support growth," the analysts wrote. "Therefore, the stock market will likely continue to rise, though it could see several shaky sessions in the short term."

On the Ha Noi Stock Exchange, the HNX-Index gained 0.38 per cent to close Friday at 81.58 points. Daily trading volume grew by over 2 per cent over the previous week, reaching 100.4 million shares worth over VND1.1 trillion (nearly $54 million) per day.

Foreign investors concluded last week as net buyers on both exchanges, picking up a combined VND224 billion ($10.7 million) worth of shares.

On Saturday, Electricity of Viet Nam (EVN) proposed a plan to hike the electricity rates by 5-10 per cent. Analysts expect this move would cast a pall over shares when trading opens today.

Government invests in rural infrastructure

The Ministry of Agriculture and Rural Development has finalised plans to develop part of a US$138 million rural infrastructure project in 15 northern mountainous provinces, according to a ministry source.

Construction on the sustainable development project was slated for the 2011-16 period. A total of VND250 billion (US$12 million) will be disbursed this year.

Of the project's total investment, $108 million is funded by the Asian Development Bank and $30 million from the Government.

The project's main goals are elimination of hunger eradication and poverty, improvement of rural infrastructure, promotion of public management of infrastructure, and enhancement of local authorities' power in each province, district and commune.

Living conditions of the poor are expected to be improved significantly when the project is completed.

Tra fish processing industry struggles to reach export goal
 
Lack of capital and raw materials are challenges that domestic exporters of tra fish face in hitting the target of US$2 billion in export value for this year, according to the Viet Nam Association of Seafood Exporters and Producers (VASEP).

Duong Ngoc Minh, Chairman of Fresh Water Fish Commission under the VASEP, said to reach the export target, farmers and export processors needed a total investment capital of VND26 trillion (US$1.2 billion) to rear tra fish for export processing activities.

However, they were having difficulties approaching these loans due to the state's credit tightening policy and high lending interest rate, Minh said.

"If they do not have the loans to produce tra fish soon, the export industry will fall into a situation of lacking raw materials for processing," he said.

Le Chi Binh, deputy chairman of the An Giang Fisheries Production and Processing Association (AFA), said the farmers and processors could get loans but only a fraction of what they needed. With interest rates between 14.5-15.5 per cent per year, demand for loans for production and business is increasing.

The lack of loans for production has pushed farmers into the situation of decreasing their volume of tra fish.

As result, the tra fish export processing industry has faced a lack of raw materials for processing, Minh said. Additionally, the bankrupt situations of seafood processors such as Binh An and An Khang in Can Tho City have caused a loss of trust from the farmers. The farmers have asked processors to pay money for tra fish before transporting the raw materials.

At present, regions producing raw materials have met 50 per cent of the demand on export processing, Minh said.

Almost all tra fish processors have now partly implemented the orders from their traditional customers while waiting for an increase in credit from the seafood processing industry and a reduction of lending interest rates, according to the VASEP.

For long term and sustainable development, relevant state offices should review the developing plans of regions for producing raw materials as well as developing seafood processing factories to ensure a balance between production ability and raw material output and avoid the depletion of raw materials, the association said.

The state should encourage each seafood processor to have its region of producing raw materials first.

The State should also continue its policy on reducing lending interest rates to help seafood processing enterprises as well as other production enterprises more easily get loans with low interest rates.

Shrimp exports in the first quarter reached US$436 million, an increase of about 9.3 per cent in value over the same period last year, according to the Viet Nam Customs Department.

In March alone, $178 million worth of shrimps were shipped abroad, an increase of almost 29 per cent over February and a year-on-year increase of 13.4 per cent.

Shrimp exports to leading markets like Japan, US, mainland China and Hong Kong have achieved positive growth rates of between 13-26 per cent, according to VASEP.

Exports to Australia in the first quarter soared to $20 million, or double the value achieved in the same period last year, and the outlook is promising, the association said.

In the first quarter, Japan's shrimp import from Viet Nam hit its highest value at $113.5 million, up 17.3 per cent year-on-year. The US was the second biggest importer at $90.2 million, up 9.2 per cent, and the EU came in third at $59.7 million, down 21.8 per cent.

Shrimp exports to the three largest markets accounted for more than 60 per cent of the country's total shrimp export value in the first quarter.

Da Nang sets up fund to aid firms
 
The central city of Da Nang and the city's Small- and Medium-sized Enterprises Association have set up a support fund for businesses facing bankruptcy. Funding will come from major enterprises and banks, as well as an initial contribution from the city budget of VND100 billion (US$4.7 million).

Over 4,100 of the city's estimated 14,000 businesses have gone bankrupt since 2009, according to a report by the association.

"The association also plans to integrate loss-making enterprises into groups to eliminate mass bankruptcies," said association vice chairman and general secretary Van Huu Thiet. "It's the best solution that the association has raised.

"We propose the Government extend debts and grant businesses a 50-per-cent reduction in value-added taxes," he added.

"The city will reserve a preferential fund of 10 million euros from the French development agency from last year to make up the fund," said the vice chairman of the city's People's Committee, Vo Duy Khuong. However, he nevertheless urged local businesses to rearrange their management effectively.

Nguyen Thi Thien Kim, manager of construction company Thien Kim Co, said her company has seen profits decline by 30 per cent due to high interest costs and slowed operations since the economic crisis began in 2008.

"We earned a total of VND100 billion ($4.7 million) from steel production, real estate and office rental services," Kim said. "But our profits have fallen to VND70 billion ($3.3 million) or lower."

The economic downturn has forced construction companies to delay projects, she said. Meanwhile, the company has a massive inventory of steel on hand and was paying interest rates of 19.5 per cent per year.

She also urged the Government to reduce the burden of value-added taxes, which would help business produce lower-priced products and reduce inventories.

Nguyen Van Thanh, a director of the Giang Thanh construction company, said his firm has just completed servicing a bank debt load of VND1 billion ($48,000). "We had to delay projects last year because our subcontractors were insolvent, so I have just contracted for small projects like residential buildings only," Thanh said.

Drugs market stable: traders association

High income costs have pushed the medicine price up, according to pharmaceutical traders.

They said the price had increased by between 5 and 10 per cent. Of which the price for domestic drugs surged further than that of foreign products.

In just one month, the medicine price had increased twice, said a medicine shop owner in HCM City's District 10.

Traders said they were forced to increase the price as distributors raised their own due to the higher costs of raw materials and petrol.

In agreement, the Viet Nam Pharmaceutical Association confirmed that during the current time, the prices of both domestic and foreign medicine have been chugged.

However, the change remained minimal and the pharmaceutical market stable, the association reported.

It said that domestic medicine had increased at a rate of 16 per cent while the price of foreign drugs rose by 6.7 per cent.

The association said about 16 per cent of domestic drugs and 6.6 per cent of foreign drugs saw prices increase.

The HCM City Department of Health said it had received many applications asking for price increases since the beginning of this year, many involving unreasonable claims.

For more than one year, HCM City has organised programmes to stabilise medicine prices to great effect.

Currently, about nine companies are joined in these programmes, with 85 types of medicine, nearly double the number last year. — VNS

To effectively run the programmes, the city also regularly inspects stores that join the initiative.